Administration September 23, 2011

FASB Issues New Multiemployer Plan Disclosures

September 23, 2011 (PLANSPONSOR.com) – The Financial Accounting Standards Board (FASB) has issued new disclosure rules regarding employer participation in a multiemployer plan.

 

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According to accountingeducation.com, Accounting Standards Update No. 2011-09, Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan is intended to lead employers to provide more information about an employer’s financial obligations to multiemployer pension plans.

Multiemployer pension plans commonly are used by an employer to provide benefits to union employees who may work for many employers during their working life, thereby enabling them to accrue benefits in a single pension plan for their retirement.

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As announced earlier this year (see FASB Changes Position on Multiemployer Plan Disclosures), the new disclosures include:

  • The amount of employer contributions made to each significant plan and to all plans in the aggregate.
  • An indication of whether the employer’s contributions represent more than five percent of total contributions to the plan.
  • An indication of which plans, if any, are subject to a funding improvement plan.
  • The expiration date(s) of the collective bargaining agreement(s) and any minimum funding arrangements.
  • The most recent certified funded status of the plan, as determined by the plan’s so-called “zone status,” which is required by the Pension Protection Act of 2006. If the “zone status” is not available, an employer will be required to disclose whether the plan is (a) less than 65 percent funded; (b) between 65 percent and 80 percent funded, or (c) at least 80 percent funded.
  • A description of the nature and effect of any changes affecting comparability for each period in which a statement of income is presented. 

Prior to the issuance of this Update, employers were required to disclose only their total contributions to all multiemployer plans in which they participate.

For public entities, the enhanced disclosures will be required for fiscal years ending after December 15, 2011. For nonpublic entities, the enhanced disclosures will be required for fiscal years ending after December 15, 2012. Early application will be permitted.

The September 2011 FASB in Focus provides an overview of the main provisions in the Update, which is available from the FASB Accounting Standards Update page, or HERE. 

Administration September 23, 2011

ERIC Pushes Back on PBGC Premium Proposal

September 23, 2011 (PLANSPONSOR.com) – An employer industry trade group has pushed back on a proposal that could result in higher pension premiums for employers.

 

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In a letter to members of the Joint Deficit Reduction Committee – the new congressional committee responsible for deficit reduction legislation – the ERISA Industry Committee (ERIC) urged rejection of the Administration’s proposal (see Obama Proposes PBGC Premium Hikes) to allow the Pension Benefit Guaranty Corporation (PBGC) to determine the variable rate premiums paid by private sector sponsors of pension plans as well as the authority to determine the creditworthiness of the companies that voluntarily offer pension plans to their workers.

According to an announcement, ERIC charged that the increase in premiums is in fact a 100% tax increase on many companies that voluntarily offer their workers defined benefit pension plans, and that the proposed premium increases are unnecessary. 

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“We’re experiencing one of the most dangerous economic disorders in history; now is not the time to add new and unnecessary burdens on companies that voluntarily provide pension plans for their workers,” added Mark Ugoretz, President and CEO of ERIC in a press release.

Ugoretz said that even as a revenue measure, this proposal fails, since it will drive more companies out of the pension system, eliminating the PBGC’s “customer base and their premiums.”

ERIC particularly opposes the authority of the PBGC to determine its own premium especially based on its own determination of the credit worthiness of its premium payers.  “It’s a direct conflict of interest,”  Ugoretz said.  ERIC said that in the private sector, a company can choose among insurers or even whether to insure, but when it comes to pensions, the law requires that plan sponsors insure their plans with the PBGC and the PBGC needs oversight.  Currently, Congress ultimately oversees the PBGC and determines its premium; ERIC urged that congressional oversight should continue.   

ERIC cautioned that, under the proposal, companies that voluntarily sponsor pension plans would be subject to the PBGC effectively making a determination of the company’s credit-worthiness that would affect investor decisions, while the plan sponsor’s similarly situated competitors would not be subject to the PBGC’s determinations.  If enacted, the proposal would pose yet another reason to abandon pensions, according to ERIC.

ERIC warned that “increasing the cost and unpredictability associated with providing pensions to workers will force companies to exit the system, further eroding the system.”  Ugoretz said that “the private pension system is already under stress, suffering from another perfect storm of low interest rates, volatile equity markets, and pension funding rules that require unpredictable and often huge contributions.  This is the wrong solution to the wrong problem at the wrong time.”

 

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